Did the DC Court of Appeals Doom the Future of Obamacare?

Did the DC Court of Appeals Doom the Future of Obamacare?

On July 22, two judges on a three-judge panel of the 3rd District Court of Appeals in Washington, DC, ruled that “Obamacare” insurance exchange subsidies are illegal in 36 states. If this decision is upheld, that means about 4.5 million people in those states will lose subsidies intended to help them afford insurance — which means they probably will lose their insurance as well.

The decision threatens to throw the entire program into chaos. Insurance companies that were deeply into planning for the fall open enrollment period now have no way to know what to plan for. Further, the consulting firm Avalere Health calculated that cutting those subsidies would cost the affected states billions of dollars and push premium costs up by an average of 74 percent in those states. Even if you aren’t receiving a subsidy, the insurance companies may have to charge you more for insurance if fewer people in your state are insured.

Some pundits also think that if the subsidies do stop in the 36 states, under the wording of the law many employers in those states also would no longer be penalized for not offering insurance to employees. The loss of subsidies could then set up a ripple effect that could be devastating to many people who didn’t even use the exchanges.

The Reason Behind the Decision

When the Affordable Care Act (or “Obamacare”) was being written and debated in 2009 and 2010, it was assumed that the states would create their own insurance exchanges. The law as written offers subsidies to those enrolled “through an Exchange established by the State.”

However, more than half of the states either couldn’t or wouldn’t create a state exchange, so the federal government stepped in and did it for them, which the law allows. In those states, the majority appeals court decision says, the subsidies are illegal because the exchange was not “established by the State.”

People critical of this ruling say that it ignores the obvious intention of the law. The purpose of the exchanges was to make it simple to apply for policies and subsidies at the same time. Those who didn’t qualify for a subsidy had no need to go through the exchange to buy insurance; they could go to a broker or just contact insurance companies directly.

What You Need to Know Now

If you are among the 8 million people who purchased insurance through the exchanges, be assured the subsidies, if you receive one, are still in place at the moment. You can go ahead and pay your next month’s premium.

Also, there is a good chance this ruling will be overturned before it ever goes into effect. There are no guarantees, however, especially if the Supreme Court gets involved.

What Happens Next?

Just an hour after the 3rd District Court issued its opinion, the 4th District Court of Appeals ruled on a very similar case and upheld the subsidies everywhere.

Most of the time when something like this happens, the two cases would go directly to the Supreme Court for a final decision. However, it’s very likely the White House will ask the entire 3rd District Court to re-hear the case. This means that instead of being heard by just a three-judge panel, all eleven 3rd District Court judges would be involved. If the full Court reverses the three-judge panel decision, that may be the end of the challenge to the subsidies. And until that happens, the 3rd District Court decision is on hold, and subsidies will continue.

If the full 3rd District Court upholds the panel’s decision, however, then the case certainly would go to the Supreme Court. Opinions vary about what the Supreme Court justices might decide.

It is also possible that, if the full 3rd District Court upholds the panel’s decision, Congress might open the law for revision. Such a move could turn into the legislative equivalent of the Gunfight at the OK Corral, especially in the House, which has voted more than 40 times to repeal the law altogether.

The majority of legal experts commenting on the situation expect the subsidies to continue. But nothing is certain at the moment.